SUBJECT - Use of Campaign Contributions--Past Indebtedness of the Candidate

REQUESTED BY: The Honorable Larry D. Stoney, Senator, 4th District

QUESTION:

1. May funds received in a current campaign be used to make payments on a loan, the proceeds of which were for a campaign prior to July 1, 1977?

2. May unexpended funds, if any, after a current campaign be used to reimburse the candidate for prior payments made on that loan or to make payments on that loan?

CONCLUSION

1. See Analysis.

2. See Analysis.

FACTS

In this request for advisory opinion, the Senator advises that in connection with a campaign prior to July 1, 1977, he personally borrowed funds from a bank to use the proceeds for campaign purposes and has since been paying both interest and principal out of his own funds. He did not file a Statement of Organization within 30 days after July 1, 1977, but has since filed for reelection, formed a campaign committee, and filed a Statement of Organization. His inquiry is aimed at hopefully having sufficient funds not only to conduct his current campaign but to make payments on or pay off the loan and to reimburse himself for payments that he has made on the loan.

ANALYSIS

Section 49-1409 provides that an elective officeholder shall, if eligible under law, be considered to be a candidate for reelection to that same office for the purposes of the Act.

Section 49-1446(2) provides that contributions received or expenditures made by a candidate or an agent of a candidate shall be considered received or made by the candidate committee.

Sections 49-1415 and 49-1419 define what contributions and expenditures are, namely the receiving or the paying out of money or anything of value for the purpose of influencing the nomination or election of a candidate, including loans.

Section 49-1449 provides, in part, that any committee in existence on July 1, 1977, and desiring to remain in existence shall file a statement with the appropriate filing officials within 30 days after July 1, 1977. Any committee in existence on July 1, 1977, and not filing a statement within 30 days after such date shall be dissolved . . . Any person who fails to file a Statement of Organization required by this section shall pay to the Commission a late filing fee . . . for each day the statement remains not filed . . ..

Sections 49-1455(2) and 49-1456(2) recognize the receipt of contributions and the payment of expenditures including loans in different accounting periods.

Section 49-1479(2) provides that a candidate committee shall not make a contribution to or an independent expenditure in behalf of another candidate committee. Section 49-1466 provides:

that any person, who after being a candidate for office terminates the candidate committee, may transfer any unexpended funds from such terminated committee to another candidate committee, a political party committee, or a tax-exempt charitable institution, or refund such unexpended funds to the contributors of the funds upon termination of the campaign committee.

Commission Amended Rule 4 provides that upon dissolution, a candidate committee may make a disbursement of unexpended funds to another candidate committee, including a candidate committee of another office, a political party committee, or a tax-exempt charitable institution, or return such unexpended funds to any or all of the contributors thereof on any basis that said candidate determines.

Federal Election Commission Advisory Opinion AO1977-41 indicates that prior campaign debt may be assumed and paid by a new campaign committee and permits the distribution of unexpended funds to pay a past campaign debt on the grounds that unexpended funds may be distributed or used for "any lawful purpose" pursuant to 2 U.S.C. section 439(a) and section 113.2(c) of the Federal Election Commission regulations.

It is clear that the incurring of an indebtedness in one reporting period and the payment of the same in another is recognized and permitted. However, since the Senator did not file a Statement of Organization within 30 days after July 1, 1977, his prior campaign committee is dissolved by operation of law. Amended Commission Rule 4 also provides that in order for a campaign committee to be relieved of filing obligations and to no longer subject to the Act, it must file a Statement of Dissolution. It further provides that such a Statement of Dissolution and a completion, therefore, of the dissolution process may not be affected unless and until the committee no longer has campaign debts.

Under these circumstances we take the position that even though the prior campaign committee stands dissolved by operation of law, it could receive contributions and make expenditures for the payment of any outstanding indebtedness previously reported, including indebtedness previously reported under the now repealed Corrupt Practices Act. However, in order to do so, a Statement of Organization, subject to late filing fees, must be filed in order to comply with the provisions of section 49-1446(1) to the effect that no committee may receive contributions or make expenditures unless a Statement of Organization is on file.

In addition, we take the position that indebtedness of the prior committee may be assumed by the current committee similar to the situation in Federal Election Commission Advisory Opinion AO1977-41, and that such an assumption, even without a release of the prior committee or candidate by the creditor, would permit the prior committee to complete its dissolution by filing a Statement of Dissolution.

Problems occur, however, in connection with the payment of that assumed indebtedness. We take the position that after such assumed indebtedness is disclosed in a campaign statement filed with the Commission by the current committee, contributions received, so long as there is no other unpaid indebtedness as of the date of such assumption, may be used as expenditures for the payment of that assumed indebtedness as well as other campaign indebtedness to be incurred thereafter, including interest accruing thereafter on the assumed indebtedness.

Otherwise, we take the position that any payment on such indebtedness, whether it be the assumed obligation of the current committee or the personal obligation of the candidate, including interest accrued up to the time of such assumption, made as an expenditure by the current committee would be a transaction outside the scope of the Act and not a violation thereof. In other words we are unable to find any prohibition in the Act to the making of such expenditures and specifically such expenditures would not be a violation of section 49-1479(2), which prohibits a candidate committee from making a contribution or an independent expenditure in behalf of another candidate committee, since the prior committee has been dissolved by operation of law.

If such payment is made with unexpended funds upon the dissolution of the current committee and we were governed by the provisions of the Federal Act which permits a distribution for "any lawful purpose," there would be no problem. However, the Nebraska Act, section 49-1466 authorizes such distribution of unexpended funds upon the dissolution of a candidate committee only to specific persons and entities. Nevertheless, the Nebraska Act and section 49-1466 do not contain a prohibition against a distribution to persons or entities other than those described in section 49-1466. Under these circumstances such a distribution would also be outside the scope of the Act.

With respect to such expenditures or distributions outside the scope of the Act, we do not have jurisdiction to render an opinion as to the legal consequences thereof other than to hold that such expenditures or distributions would not be a violation of the Act.

Federal Election Commission Advisory Opinion AO1977-52 illustrates a concept of soliciting contributions specifically to pay off a past campaign indebtedness. We take the position that a similar approach may be taken with respect to the Senator's prior committee if it files a late Statement of Organization, i.e., it may solicit funds specifically for the purpose of paying off the past indebtedness. And, similarly we take the position with respect to the current committee that funds may be solicited specifically for the purpose of paying off the past indebtedness assumed including interest accrued since the assumption, provided, however, that the contributors are so advised and put on notice that their contributions are specifically for the purpose of paying off a past indebtedness and that the committee accounts for the same accordingly.